Wall Street, Then and Now: Extreme Consumption, Scandal

After the Ball: Gilded Age Secrets, Boardroom Betrayals, and the Party that Ignited the Great Wall Street Scandal of 1905 , by Patricia Beard. HarperCollins, 402 pages, $25.95.

Patricia Beard kicks off her book with a string of superlatives. James Hazen Hyde, the son of Equitable Life Assurance Society founder Henry, was “the handsomest man in any room, the most dramatically dressed, and, at nearly six foot four, usually the tallest.” The lavish ball he threw in Manhattan in January 1905 helped touch off a “business brawl that entangled the most famous railroad entrepreneurs, industrialists, and financiers of the era.” But these claims, like the ball Ms. Beard describes in rich detail, are a bit too extravagant.

At the turn of the 19th century, insurance was the largest single sector of the financial-services industry. In 1900, “half of all American savings were held in life insurance or annuities.” The Equitable Life Assurance Society, with its 300,000 U.S. customers and its 77 foreign offices, along with rivals New York Life and Mutual Life, comprised the three “racers.” The Equitable’s board-which controlled a vast investment pool-included such Gilded Age worthies as Henry Clay Frick, bankers Jacob Schiff and August Belmont, and railroad magnates Edward H. Harriman, James J. Hill and Alfred Vanderbilt.

Like other turn-of-the-century financiers, Henry Hyde, the self-made force of nature who created the Equitable, routinely mixed business and personal funds, putting personal employees on the payroll, and creating off-the-books slush funds to make loans and settle litigation. (Dennis Kozlowski, with his Tyco-bought $15,000 umbrella stand, wasn’t such a financial innovator after all.)

Hyde groomed his coddled second son, James-his first son, Henry Jr., died at the age of 8-to assume his rightful place. Although he showed no visible capacity for finance-or for work in general-James was elected a director of Equitable in his sophomore year at Harvard.

Henry Sr. died in 1899, leaving James, who graduated from Harvard in 1898, as the controlling shareholder. “Henry’s death had transformed James from a boy just out of Harvard, whose chief distinction was his rich father, to one of the most interesting young men in New York.” (It’s a common mistake to conflate wealth-especially inherited wealth-with “interesting.” See under: W magazine or Bright Young Things .)

James Hyde spent his time “coaching,” swanning around Paris (he was a huge Francophile) and turning the Oaks, his 400-acre compound in Islip, Long Island, into a recreation center. In 1901, he and Alfred Vanderbilt raced by horse-drawn coach from New York to Philadelphia and back, setting a record by covering 224 miles in less than 20 hours.

James drew a salary from the company, as well as fees “as a director of forty six companies, including thirteen railroads, fourteen banks, and four trusts.” In 1902, he formed a syndicate, James Hazen Hyde and Associates, “which acted as a middleman between Wall Street firms with issues to sell, and the Equitable, as buyer.” Such conflicts of interest were wide-open and not questioned.

But trouble was brewing in the highly competitive business. The racers routinely poached each others’ agents. Rudderless after the elder Hyde’s death, the Equitable fell from first place to third in 1903. Equitable president James Alexander, and Gage Tarbell, the Gatsbyesque second vice president, hatched a plan to ease James out by granting exclusive voting control to company policy-holders. But when they presented their scheme to young Hyde in early 1905, he demurred.

On January 31, 1905, amid the brewing coup, James Hyde held a costume ball for 600 at Sherry’s Hotel. “James decided to decorate the hotel to evoke the gardens Le Notre designed for Louis XIV at Versailles,” Ms. Beard writes. Whitney Warren (the Robert Isabell of his day) was hired to execute the plan. The entertainment: performances by the Metropolitan Opera’s orchestra and ballet corps. Hyde also commissioned playwright Dario Niccodemi to compose a one-act play for Réjane, the French comic actress. The ball ended at 7 a.m., “after a second and then a third supper had been served.” There was nothing particularly scandalous about it-at least not immediately.

Après le ball, le déluge . Ms. Beard launches into a detailed play-by-play of the boardroom battle for control of the Equitable. Hyde enlisted a dream team of lawyers-including future Secretary of State Elihu Root-and investors such as E.H. Harriman to fend off his grasping subordinates. But the railroad baron was more interested in the Equitable’s pool of capital than he was in young James’ need for a surrogate father.

Hyde’s opponents used the heir’s extreme consumption as a weapon. “Public coaches, special trains, elaborate banquets, costly and ostentatious entertainments, accompanied, as they are, by continuous notoriety of a flippant, trivial, cheap description, are not only damaging to the influence of Mr. Hyde as an officer of the Society but are directly hurtful to the Society,” charged James Alexander. Rumors began to circulate that the party cost $100,000 and that the Equitable had paid for it.

That these charges were false hardly mattered. (Hyde’s wealth ultimately came from the Equitable, one way or another.) As the ways in which insiders milked the policy-holders for profits were revealed, Ms. Beard notes, the question of control over the Equitable was “rapidly overshadowed by a growing understanding of the connections between Wall Street and the insurer.”

The New York State Legislature-as feckless and susceptible to naked lobbying back then as it is now-launched investigations. Amid the turmoil, Henry Clay Frick stepped in as a lead director. The report he issued in May 1905 is noteworthy for its contemporary resonance: “There is found throughout its official personnel a sort of moral obliqueness-a condition where personal gain seems to be at times the paramount idea.”

The fallout was swift. Hyde resigned and sold his shares to Thomas Fortune Ryan (one of the few Irish-Catholic robber barons). The New York State Legislature convened a committee in June 1905, headed by future Supreme Court Justice Charles Evans Hughes; the result was tightened regulations and curtailed careers-but no jail sentences. “As for the financiers and railroad men involved in the scandal,” Ms. Beard writes, “all of them went on to become richer and more powerful.”

That’s just one reason why the dénouement of this affair is less than satisfying. “The Hyde Ball came to be seen as the apotheosis of an era, as well as the centerpiece in the story of a young man’s rise and fall,” Ms. Beard writes. But Hyde was born at the top. And the fall-a cushy self-imposed exile in Paris-was simply a realization of Hyde’s ambition. He left New York in December 1905, bought a fabulous house in Versailles and got married-several times. He didn’t return to New York until 1941, having fled Nazi-occupied Paris for Manhattan’s Savoy Plaza Hotel. He died in July 1959.

So why does the story matter? “One reason that we can prosecute the corporate cheater now,” according to Ms. Beard, “is that they were exposed at the time of the Equitable crisis.” Actually, we can thank the Securities and Exchange Commission and the 1929 market crash for that. The “Great Wall Street Scandal of 1905″ did occur at a time of great ferment, but we don’t get much of that context here. The ball and the ensuing brawl may have garnered lots of contemporary press coverage-Ms. Beard cites 115 front-page articles in The New York Times . But money, status and celebrity come and go very quickly in New York. Just ask Sam Waksal. Not every episode, sadly, makes for compelling history.

And yet this patient, occasionally elegant book is not without its charms. Ms. Beard provides fine period detail on everything from how undertakers worked to the origins of the law that banned the public wearing of masks. But it’s as if the author had inherited the artwork and furnishings from a great prewar six on Park Avenue-and with these, tried to fill a townhouse on East 64th Street. The pedigree is there and it’s nice to look at, but the good stuff is spread rather thin.

Daniel Gross, who writes the “Moneybox” column for Slate, is co-author (with Davis Dyer) of The Generations of Corning: The Life and Times of a Global Corporation (Oxford University Press) .